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Brazil regulator probes whether activist's funds engaged in insider trading -documents

By Tatiana Bautzer

SAO PAULO, May 23 (Reuters) - Brazilian regulators are probing potential insider trading violations by activist investor Nelson Tanure related to his acquisition of medical labs company Alliar, according to documents seen by Reuters.

Tanure, who in the past has waged takeover battles in the oil and telecom industries, last November proposed buying a controlling interest in Centro de Imagem Diagnosticos SA , as Alliar is formally known. The deal was finally announced on April 14.

Brazil securities regulator CVM is now probing how funds controlled by Tanure were trading Alliar shares with knowledge of non-public information derived from the funds' talks to buy the company, which would constitute insider trading, the documents show.

Tanure representatives said earlier this month that the fund that now controls Alliar, Fundo de Saude, and the investor's lawyers have not been notified of any insider trading probe.

Trades during the talks, which lasted from November until mid-April, are being probed by the CVM. Its records are under seal, but the probe was active as of mid-May, according to one of the documents.

Tanure has been successful in recent years buying companies such as oil producer PetroRio SA and homebuilder Gafisa SA but he has also been fined by the CVM in the past over abuse of controlling power.

Alliar's shares surged by 22.5% on Nov. 18 after a Brazilian newspaper reported that Tanure would buy the company at 20.50 reais per share.

Between Nov. 18 and Nov. 30, four investment vehicles controlled by Tanure, which already held a 29% stake in the company, sold 1.5 million common shares in Alliar for 25.465 million reais, according to the documents, reaping an average price 39% above its Nov. 17 closing price, or 7 million reais more than what the shares would have fetched before the news.

On Dec. 22, the company announced that shareholders could opt to sell their shares to Tanure's vehicles only within two years. As the deal could take longer to close, markets were doubtful about the need for a tender offer to minority shareholders, and shares fell.

In the CVM's analysis of the trading of Alliar shares, the regulator alleged that the funds knew about the plan to allow investors to sell their shares within two years through a derivatives contract, since they were a party in the talks, and knew that when the disclosure of the contract's existence became public, shares would fall.

In the document, CVM manager Marco Antonio Papera Monteiro said the funds' conduct suggested evidence of "potential crimes."

Asked to comment on the allegations in the document, Tanure representatives repeated that they were not aware of any probe. The CVM declined to comment.

On April 14, the company announced most shareholders had opted to sell immediately and that Tanure's vehicles had built a 63.3% stake. It also said Tanure would launch an offer for all outstanding shares.

In a statement earlier this month, Tanure representatives said the deal closure was successful and that the transaction was "transparent."

Alliar is the latest holding of Tanure, who since the 1990s has acquired stakes in newspapers, shipyards, Brazilian telecom company Oi SA, an oil company and a homebuilder.

In an earlier run-in with the CVM, the regulator fined him 130 million reais ($26.7 million) in 2019 for "abuse of controlling power" at shipyard Verolme. CVM said part of Verolme's cash was diverted to other companies controlled by Tanure.

In the case of Verolme, the fine was ultimately reduced by 85% to 16.2 million reais after an appeal to Conselho de Recursos do Sistema Financeiro Nacional. Unlike other market violators, Tanure was not restricted by regulators from working in listed companies. He is currently a board member at Alliar. ($1 = 4.8639 reais) (Reporting by Tatiana Bautzer in Sao Paulo Editing by Christian Plumb and Matthew Lewis)

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